Cashew scam: The signature of C-Company minion
Part 1 touched upon the Cashew scam and how it had the signature of a C-Company minion. In addition to the two who are named in the Cashew scam (Ajay Shah and Vijay Kelkar), the old suspects comprising of Susan Thomas, C B Bhave, K P Krishnan (both former bureaucrats and highly influential Securities Exchange Board of India (SEBI) board members) and their political Godfather P Chidambaram will keep crisscrossing on just about any financial scam. As the Mumbai based business journalist Palak Shah’s book The Market Mafia reveals the plot of how these now-infamous but powerful figures are part of a massive corruption racket and linked to each other through a maze.
After my book ‘C-Company’ (published on March 5, 2018) first laid bare Chidambaram’s various underhand dealings and how he used stock markets as a tool for making money with the help of unethical stockbrokers, ‘The Market Mafia’ (published on November 7, 2020) takes the story forward and describes the ‘Facade’ that this influential cabal had created for several years. C-Company explained in great detail the threat Jignesh Shah posed to the Financial Deep State of India and how he became the No. 1 target of the C-Company head honcho.
This Facade also holds the mystery to the recent Cashew Scam involving National Bulk Holding Corporation and its 100% promoter True North (a private equity fund) that are at the core of the ‘Facade’ of the ‘Cabal.’
The Market Mafia
Palak Shah’s book, The Market Mafia deals with the co-location or the Algo trading scandal at the National Stock Exchange (NSE) and reveals the inside story of a stock market scam bigger than Harshad Mehta and Ketan Parekh. The fact that none of the perpetrators has even paid one paisa fine shows the clout of this Deep State and how it has laid down deep roots into India’s bureaucracy. With the exception of a few politicians, most don’t have a clue of how financial markets work. And the C-Company exploited this to the hilt.
Two chapters (titled Life In the Speed Lane and The Whiff of Money) in the book specifically trace the story of the “Cabal” and the “Facade” they created and even reveals the money trail up to the mystic blue sea islands of Mauritius and Cayman Islands.
PGurus is presenting excerpts from these two chapters of The Market Mafia that reveals the maze, ramifications of the Deep State, their money trail and how it used the means to act. This Facade also holds the mystery to the recent Cashew Scam involving National Bulk Holding Corporation and its 100% promoter True North (a private equity fund) that are at the core of the ‘Facade’ of the ‘Cabal.’ Read on…
The Market Mafia:
Chapter 2: Life In the Speed Lane
This chapter in the book reveals deep nexus between Ajay Shah, Susan Thomas, C B Bhave, K P Krishnan, Vijay Kelkar, top officials of the NSE Chitra Ramakrishna and Ravi Narain and everybody’s boss P Chidambaram. “The P-Note committee of 2009 had Krishnan, his colleague C K G Nair, NSE’s MD, CEO Ravi Narain and Ajay – all the Chidambaram blue-eyed boys. His agenda was safeguarded with the loyal ‘bunch’. After he quit the capital market division in the Ministry of Finance, Nair was made a judge at Securities Appellate Tribunal (SAT) while his daughter had worked with the NSE since 2013.”
NSE was inaugurated by Manmohan Singh when he was the FM in 1994 and the economist-turned-politician often felt that the exchange was his baby. NSE’s Narain was known to be close to Singh’s blue-eyed boy, the prominent economist and fellow Punjabi, Montek Singh Ahluwalia.
“SEBI’s investigation that followed a whistleblower letter in 2015 about Algo trading scam at NSE revealed how Ajay got crucial data from the exchange for years without any formality. What and how much data did NSE share with Ajay and Susan? This is simply not traceable. SEBI too is clueless.”
“Dr Narottam Shah, Ajay’s father, was one of India’s most influential economists during the 1970s-1980s. In 1976, he established an independent economic think-tank – Centre for Monitoring Indian Economy (CMIE) – which sounded like just another government department but actually was a private limited company.”
“With the facade of CMIE, Indira Gandhi Institute of Development Research (IGIDR) and the backing of S A Dave, Lakdawala gave Ajay and Susan an advantage to mask the fact that Susan, who has also been a guide to a SEBI official in doctorate studies, did not herself hold a PhD degree. Blessings of Dr Patil, NSE’s founder boss and a father figure to the staff at the exchange but much junior to Dave in IDBI, also helped Ajay gain a foothold at the exchange. Dave remained the chairman of CMIE and Ajay, who was never officially employed by NSE in any capacity, except board seats on group companies, operated as a perfect insider in the exchange.”
“Since the narrative as a creator of Nifty index had stuck, Ajay was engaged at National Securities Depository Ltd. (NSDL) by Bhave, who was tutored by Dave when he was a junior official in SEBI during his first stint. Ajay was made a board member of NSE promoted Clearing Corporation of India for over a decade between 2001 and 2012 and National Commodity Derivative Exchange (NCDEX) between 2003 and 2005. Ajay and Susan were even made part of SEBI committees, one such also had Bhave and Ajay working together in 2005.”
“Ajay’s bio gives his illustrious connections in the government and financial markets as he was associated with many committees, some of which were very crucial ones during Chidambaram’s tenure as the FM. He was a virtual member of the Planning Commission Committee on Financial Sector Reforms, chaired by Raghuram Rajan in 2009.”
“Prior to that, Ajay and Rajan had written a paper together titled ‘New Directions in Indian Financial Sector Policy’ way back in 2005. Then, Rajan was not known much in India as he was on a teaching job in the United States. Ajay even wrote a paper with Urjit Patel on ‘Pension Funds and Social Security’. Both Rajan and Patel became governors of RBI successively. So clearly, Ajay had been hobnobbing with the who’s who of the Indian financial sector and he leveraged on it very successfully.”
“NSE was inaugurated by Manmohan Singh when he was the FM in 1994 and the economist-turned-politician often felt that the exchange was his baby. NSE’s Narain was known to be close to Singh’s blue-eyed boy, the prominent economist and fellow Punjabi, Montek Singh Ahluwalia. Narain is a Jat surname of a strong ethnic group, who have their origins in Haryana. Several of the Jat tribesmen had migrated to south-western Punjab. Notably, Narain’s father, Hari Narain, too, was a well- known economist and a contemporary of Singh. Narain and Ahluwalia shared an old bonding, as both are Cambridge University alumnus.”
“When Singh became the PM, he made Ahluwalia his key advisor. Ajay who, with the help of NSE had already established a foothold in New Delhi, became a consultant to the Ministry of Finance between 2001 and 2005 and was known to be close to Chidambaram when the latter became the FM in May 2004. It was a well-known thing among bureaucrats in the Finance Ministry in Delhi that Ajay also played a role in writing Chidambaram’s budget speech.”
NSE, under Narain, never deprived Kelkar of that. Similarly, during Kelkar’s tenure at NSE, the exchange raised Narain’s annual pay package to around Rs.8 crore.
“While Susan still carried on with most of the work from Mumbai, Ajay remained in Delhi and got employed with the National Institute of Public Finances and Policy (NIPFP) in 2007 as a research professor. The organisation fell directly under the preview of India’s Finance Ministry and the RBI. NIPFP is a think-tank that provides economic inputs to the government on planning and is a go-to organisation for the Finance Ministry.”
“The governing body of NIPFP comprises three representatives of the Finance Ministry, who then reported directly to Chidambaram when Ajay was employed there. Interestingly, the NIPFP board also had a representative of IGIDR, where Ajay and Susan were already engaged. A few members also included executives from corporate houses.”
“The chairman of NIPFP until March 2020 was one of India’s celebrated former economists and bureaucrat Vijay Kelkar. He was the non-executive chairman at NSE between 2010 and 2013 when the COLO scam was at its peak.”
“Kelkar got into NSE when Bhave was the SEBI chairman and his appointment at the exchange gave rise to a conflict of interest debate. Kelkar joined the exchanges’ board soon after laying down the office as the chairman of the 13th Finance Commission. Ideally, when bureaucrats retire and join private companies, they should follow some cooling-off period but Bhave did not pay any heed to this and did not object to Kelkar’s appointment at NSE. SEBI holds the power to approve or disapprove key appointments at exchanges.”
“At NSE, even though Kelkar was a non-executive chairman, his pay could easily be a matter of envy for many top corporate executives. A flat in an up-market locality and a chauffeur-driven car, are the few luxuries that bureaucrats can’t make do without. NSE, under Narain, never deprived Kelkar of that. Similarly, during Kelkar’s tenure at NSE, the exchange raised Narain’s annual pay package to around Rs.8 crore.”
“After the COLO scam broke, Kelkar wrote letters to all the top bureaucrats in support of Ajay explaining his innocence. It was a closely-knit group thriving on the high patronage of the chain of the ‘bureaucratic brotherhood’, the protection of political ‘Godfather’ and corporate interests.”
“As on date, both Bhave and Kelkar are together ensconced on the board of The Indian Institute for Human Settlements (IIHS), a private limited company that promotes research.”
“Kelkar has been on the IIHS board since 2010 and Bhave joined him in 2013. On February 6, 2020, IIHS arranged a talk on Kelkar and Ajay’s book in Bangalore, where key speakers also included Bhave and Krishnan. Together, Kelkar and Ajay are on the board of National Bulk Handling Corporation. The company is 100 per cent promoted by a private equity firm, True North, which was originally incorporated as India Value Fund (IVF) in 1999 and invested in private companies. Ajay’s association with IVF can be traced back to the early 2000s. The fund’s promoter company True North Trusteeship Private Ltd now has Dave and Susan as its board of directors. It has huge money flowing in from Mauritius and Cayman.”
“Even more than being an academician, Ajay was NSE’s chief lobbyist in Delhi and kept promoting derivatives trading. In turn, the exchange offered him unhindered access to the data of Mumbai markets. The data he was being given on a platter from NSE was used by Ajay and entities linked to him to create a high-tech trading software. This software was also sold to brokers for derivative trading at NSE COLO and the deal was 40 per cent sharing of the trading profits. There was no agreement on loss sharing – perhaps the software developers were self-assured of its prowess.”
“Despite there being evidence of such arrangements, which was uncovered during investigations that followed the 2015 whistleblower exposé on NSE, SEBI fell woefully short in investigating the software deal. This cuts the most crucial piece in the trail that could lead to the beneficiaries – albeit by design.”
“Money flow in some of the companies, where Ajay and his family members are linked, is laced in an intricate web in tax paradise. The family also shares links with big Mumbai brokers that cater to large FIIs. Susan was also a board of director of Geojit Securities, one of South India’s leading stock broking firms, between 1999 and 2003. It was a clear case of conflict then too, as she was an NSE insider and got data without any agreement.”
“Susan was also a member of SEBI’s secondary market advisory committee between 2009-2017. During the same time, Susan’s sister, Sunita, who owned IFPL along with her partner, Krishna Dagli, provided Algo trading software to many brokers to trade at NSE’s COLO. Ajay’s brother-in-law, Vyas, who is a shareholding partner in CMIE, is still on the board of Geojit group company. He was appointed in 2003 soon after Susan quit. Interestingly,
Susan’s brother-in-law, Lala, a top rung NSE official and a suspect in the COLO scam, earlier worked with Geojit before joining NSE.”
Chapter 8: The Whiff of money
This chapter reveals how Ajay Shah, Susan Thomas and Vijay Kelkar are linked to money flowing from Mauritius and Cayman Island. Around Rs.8000 crore to Rs.10,000 crore is flowing from Mauritius and Cayman into a mysterious PE fund True North. This money also has links with 2G Money trail. Who is the beneficiary? Also, this Fund True North owns 100% stake in National Bulk Holding Corporation, which is now caught in the Cashew scam also.
“S A Dave, aged over 80 years, who was the first boss of SEBI and currently a chairman in Ajay’s family-owned company CMIE, along with Susan, primarily a professor and researcher, are ‘designated partners’ in PE schemes of a fund called the ‘True North’.”
“IVF was renamed as True North in 2017. Currently, its scheme True North Fund V LLP has an amount of Rs.3,364 crores (approximately USD 420 million) in its kitty. In this, the two mail-box companies in Mauritius and Cayman investors have contributed 99.90 per cent funds as of March 2019. While only 0.10 per cent contribution has come mainly from True North Trusteeship.”
“It has contributed Rs.200 crores (USD 26.61 million) in the scheme and has IGIDR researcher Thomas as a nominated partner and board member along with CMIE’s Dave and Suresh Talwar who is director of a host of other companies in India and Mauritius.”
Indium V Mauritius Holdings, through which Ramtoola has contributed Rs.2,842 crores to True North V, holds more than Rs. 8,344 crores (over USD 1,098 billion) in its kitty and has 30 beneficial owners.
“When a Limited Liability Partnership (LLP) company in Mumbai or Bengaluru gets manna from Mauritius and Cayman, it most often morphs into Private equity (PE) investment and can be further deployed or just held ideal until those holding it chalk-out a roadmap for its use. SEBI has even accorded some such PE firms a licence under Category-ii fund, which means high-risk funds that cannot issue P-Notes or derivatives.”
“As per its annual returns up to March 31, 2019, the True North Fund V LLP, just a single scheme under the umbrella of True North, had received a total partner contribution of Rs.33,64,25,75,591 (Rs.3,364 thousand crores or USD 442 million at the current exchange rate of 76) out of the total obligation of Rs.44,32,40,00,000 (Rs.4,432 cores – more than USD 500 million) that was committed to it.”
Who Contributed This Money?
“A meticulous search for the document trail shows that as of March 2019 a contribution of Rs.28,42,64,38,445 (Rs. 2,842 crores or USD 375 million) into True North Fund V LLP came from ‘Indium V Mauritius Holdings’. Another Rs.3,16,18,42,590 (Rs.316 crores or USD 41.60 million) was received by the scheme from Cayman Island fund ‘QS FF EM India’.”
“Both these sources, just mail-box companies, have been painted ‘white’ to the best of the ability of top-notch legal shops ensconced in the paradise islands. Yet, the trail reveals itself.”
“The Central Bureau of Investigation (CBI) managed to track down the spectrum scam money trail passing through 22 different Indian and Mauritian companies to a single building in Mauritius. 10 of the 12 Mauritius-based companies under the CBI scanner including Mavi Investment Fund, Delphi Investment, Capital Global, Black Lion, Inditel Holding, Deccan Asian Infrastructure, Aidtel Holding, Kaif Investment, Electro Investment Ltd, Palab Investment had one thing in common – their address at Les Cascades Building, Edith Cavell Street, Port Louis, Mauritius.”
“Ramtoola-Ashraf is a signatory and director at Gibraltar Pacific Inc. and his residential address matches with that of Indium Mauritius Holdings that has contributed to True North.”
“Ramtoola’s link has now come a full circle as investments in True North. His Indium VI Mauritius Holdings, which is registered as a partner in True North Fund VI LLP a SEBI-recognised Category-II fund, is registered at Edith Cavell Street, Port Louis, Mauritius where all the 2G scam companies and Mavi Investment was registered.”
“Indium V Mauritius Holdings, through which Ramtoola has contributed Rs.2,842 crores to True North V, holds more than Rs. 8,344 crores (over USD 1,098 billion) in its kitty and has 30 beneficial owners. The details of these 30 beneficial owners can only be shared by the government of Mauritius. But needless to say, these entities again will be registered in various tax havens, and those countries like in the 2G case may not give the data even to CBI.”
“Ajay has been long associated and actively engaged with NSE and several subsidiaries of the exchange. In fact, Ajay and Susan were the only two academicians with deep access into the NSE. They received trading data from the NSE, first, in their personal capacity and, later, as academics associated with IGIDR.”
“In the case of True North, it is the association of Ajay and Susan that raises conflict of interest questions, especially since they were at the same time involved with crucial government and SEBI committees and also got vital data from NSE. Ajay and Susan’s proximity to Wadhwa, whose Ambit Institutional Equities also served FIIs, and their foothold in NSE and later at MCX is full of conflict that SEBI has not looked into. Susan was shown as a key managerial person in the filings of IVF even in 2010.”
By piecing together the story PGurus can say that a full-scale investigation is a must into the dealings of True North Fund since it had huge money flowing from Mauritius and Cayman Island. Are the beneficiary of this money and all the scams associated with the fund, entities linked to it and the companies, is any Indian politician whose names crops up repeatedly with the Cabal as mentioned by The Market Mafia??
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